Under both parties, our federal government has drastically reduced its fiscal responsibilities, resulting in cost-shifting. More of the fiscal burden is being pushed down to state governments, straining their budgets.
Resultant downward cost shifting by state government has caused cities and counties to raise their millage rates, charge user fees, rethink how they can more efficiently manage programs, or cut services. This situation is exacerbated by rezoning decisions which fail to quantify the decision’s effect on county and city budgets, a systemic Planning and Zoning problem.
Peachtree City has arguably the most stringent planning and zoning in Georgia. Until recently, I was on the PTC Planning and Zoning Commission. I will use one example (there are many) to illustrate my point.
Earlier this year, P&Z reviewed rezoning 66 acres from light industrial and low density residential to medium density residential. There were various issues raised concerning the rezoning: excessive tree removal, lack of amenity specifics, increased traffic, and quality of life factors. A much larger issue was not fully addressed in this rezoning, or almost all rezonings elsewhere, its effect on municipal and county budgets.
As County Commissioners and City Council people know from their training at the UGA Vinson Institute, industrial/commercial uses generate considerably more taxes than residential development. When possible, this fiscal factor should be kept in mind, but often is not either due to citizen pressure or lack of knowledge.
This particular geographic area was not really a good fit for industry (or a retail development). The developer proposed to have 160 houses on 66 acres, rather than 66 homes (low density). Each home would average $360,000 in price and be 1600 square feet ($225/sq. ft., a questionable figure for the area). The reader should be aware that home price is an estimate and that there is no penalty if the developer ultimately lowers the price on these homes, which could have major local tax consequences.
The PTC tax “break-even point” is $330,000 for a home (per staff studies). In other words, houses appraised over $330,000 contribute to lowering taxes, bringing in more taxes than are spent.
Thus, 160 homes (medium density) will bring in an excess property value of 160 X $30,000 ($4.8 million). The millage rate times the $4.8 million gives you what these houses contribute to the tax rolls over the cost in services provided through local taxes.
Alternatively, 66 homes with 3,200 square feet each could be constructed, costing $720,000 each (at $225/sq. ft.). Thus, there would be $25,740,000 in excess property value ($390,000 x 66). The millage rate times the $25.74 million gives you what these houses would contribute to the tax rolls over what it costs to provide services. (Note: Georgia has a quirk in its law causing a 40 percent adjustment to assessed value that has no effect on this analysis).
There was a difference of $20.94 million in taxable property value if fewer more expensive homes were built on larger lots. Said another way, the 66 homes would contribute over five times as much as the 160 more moderately priced homes in “excess” taxes (i.e. tax revenue in excess of what services are costing the city/county).
Obviously, City dwellers also live in the County and are affected by that tax burden as well. There is a total of $278,937 in extra taxes paid to the City and County annually by retaining low density versus medium density.
Over a 10-year period, this would amount to nearly $2.8 million for the City and County. Therefore, in a solely economic sense, clearly PTC should have left the 66 acres low density, rather than change it to medium density.
Unfortunately, the City Council approved this project, 5-0. Therefore, it will end up contributing to higher millage rates in the future versus the alternative. Each such case represents a relatively small amount, but if these developer-oriented decisions continue to be made (I see no end in sight) it will negatively affect taxes for both County and City dwellers. Let’s hope our City and County officials keep this fact in mind.
Author’s Note: For the sake of brevity, I simplified discussion of this model. Other key factors could be present in another case.
For example, if there were a glut of high-end homes and few buyers, it would make little sense to build more expensive homes which could not be sold (not the case in PTC). Also, if there were enforceable “55 and up” restrictions on children living in the 166 mid-range homes (there were not in this case), their true costs to the county would be much less than otherwise (i.e. no school impact; it costs over $8,000 a year in state and local taxes to educate each Fayette County student).
So, each P&Z rezoning review will need a separate budgetary analysis based on the specific facts of each case. However, when you look at the impact on the city and county budgets, the extra effort is clearly worth it.